Connecticut Money: Executives face retirement challenges

This article was featured in the New Haven Register on November 20, 2020.

Here’s a common scenario: An executive or professional realizes they are approaching retirement age — and also realizes they have spent little or no time preparing for it.

Running a company or a professional practice such as a physician’s office or accounting firm is a demanding occupation that leaves little time for anything else. As a Certified Financial Planner, I have often helped such clients play “catch up” with their retirement planning once they are in their 50s or even 60s.

High-level professionals usually enjoy above-average salaries along with extra financial perks such as stock options and pension plans. These factors can make retirement planning more complex, making it even harder for you to get organized and do the planning required. Here are tips on retirement planning for executives and professionals

Understand your lifestyle expenses. Higher income generally leads to higher consumption and higher living expenses. In order to maintain your lifestyle, you will likely need to save and invest more money than the average person.

Know your employment risk level. Joining the C-suite can lead to job volatility. Top management often pays the price for economic downturns and corporate missteps, so you have to take into account that your income and perks are not guaranteed.

Diversify, diversify, diversify. Too many executives leave all their investment eggs in one basket, tying most of their net worth to their own company’s annual results. Incentive-based equity plans that fuel rapid portfolio growth can be difficult to withdraw from, but restricted stock and stock option grants can plummet when times turn hard.

Cover the basics. Put as much money as possible into your IRA, your 401(k) plan and any supplementary retirement plans. Set aside an emergency fund with enough cash to cover six to nine months of living expenses. Make sure you have the right types and amount of insurance, including disability insurance. Fund a Health Savings Account and consider buying long-term care insurance.

Collaborate with your family. Do you understand your spouse’s expectations? In other words, is your spouse anticipating lots of travel and you are thinking about gardening and joining multiple boards of directors? Talk it all out before you retire.

Consider helping others as a mentor. Many executives miss working with people and especially helping younger people grow. If you think that may describe you, there are many ways to continue being involved with people after you retire, including joining the board of directors for other companies and getting involved with mentoring organizations such as SCORE.

Follow a solid financial plan. Create a long-term financial plan by visualizing your retirement and writing down your goals for your post-employment life. A financial planner can help you with those steps and will lay out a comprehensive wealth management strategy that will include tax planning and estate planning as well as portfolio management.

Make the time. Your current duties may be time-consuming, but it’s important for you to carve out some time to prepare for a future in which your life will no longer be dominated by your work.